### NOTICE: SLIP OPINION (not the court’s final written decision) The opinion that begins on the next page is a slip opinion. Slip opinions are the written opinionsthat areoriginally filed by the court. Aslip opinion is not necessarily the court’s final written decision. Slip opinions can be changed by subsequentcourtorders. For example,a court may issue an order makingsubstantive changesto a slip opinionor publishing for precedential purposes a previously “unpublished” opinion. Additionally, nonsubstantive edits (forstyle, grammar,citation,format, punctuation, etc.)are made before the opinions that have precedential value are published in the official reports of court decisions:the Washington Reports 2dand the Washington Appellate Reports. An opinion in theofficial reports replacesthe slip opinion as the official opinion of the court. The slip opinion that begins on the next pageis for a published opinion, and it has since been revised for publication in the printed official reports. The official text of thecourt’sopinion is found in the advance sheets and the bound volumes of theofficial reports. Also, an electronic version (intended to mirror the language found in the official reports) of the revised opinion can be found, free of charge, at this website: https://www.lexisnexis.com/clients/wareports
. For more information about precedential (published) opinions, nonprecedential (unpublished) opinions, slip opinions, and the official reports,see https://www.courts.wa.gov/opinions and the information that is linked there.'" -,;:-;:-· • • , ...,. • •• • <!).

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### L. CARLSON SUPREME COURTCLERK 

## IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CERTIFICATION FROM THE UNITED ) STATES DISTRICT COURT FOR THE ) WESTERN DISTRICT OF WASHINGTON ) IN ) MICHAELALLEN, Plaintiff,
V. ZECHARIAH CLIFTON DAMERON IV, DANIEL STANDEN, JOHN RIGAS and DAVID M. McGRANE, Defendants, ZECHARIAH CLIFTON DAMERON IV, DANIEL STANDEN, JOHN RIGAS, Third-Party Plaintiffs, STEVEN KALMANOVITZ aka STEVEN KALMAN, Third-Party Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. 93056-2 En Bane
Filed

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## F_EB_O

## _2_2_017
__

WIGGINS, J.-The United States District Court for the Western District of Washington asks us to answer two certified questions about the application of RCW 49.52.050, the wage rebate act (WRA), in circumstances ofchapter 7 bankruptcy: Is an officer, vice principal, or agent ofan employer liable for a deprivation of wages under RCW 49.52.050 when his or her employment with the employer (and his or her ability to control the payment decision) was terminated before the wages became due and owing?Allen v. Dameron IVeta/., No. 93056-2 Does an officer, vice principal, or agent's participation in the decision to file the Chapter 7 bankruptcy petition that effectively terminated his or her employment and ability to control payment decisions alter the analysis? If so, how? OrderVacating 

### J. & Certifying Questions to Wash. Supreme Ct., Allen v. Dameron, No. C14-1263RSL, at 3-4 (W.O. Wash. Apr. 28, 2016). We answer both the certified questions in the affirmative. First, officers, vice principals, or agents may be held personally liable under the WRA, even if the payday dateforthose wages came afterthe employerfiled for chapter 7 bankruptcy. Second, an officer's participation in the decision to file the chapter 7 bankruptcy petition tends to show awillful withholding ofwages-the second element required by the WRA FACTS I. Factual History MichaelAllen accepted ajob as interim chieffinancial officer (CFO) forAdvanced Interactive Systems Inc. (AIS) 1 and transferred to Seattle from the United Kingdom where he worked for one of AIS's subsidiaries. AIS was profitable only twice in its company history and repeatedly defaulted on loans from its senior secured lender, Anderson Mezzanine Partners (KAMP). 2 KAMP initially excused those defaults by renewing its agreements with AIS from 2010 until early 2013. However, on February 14,

1 AIS developed, manufactured, and sold virtual reality products for government agencies, the military, and the federal Department of Homeland Security.
2 In August 2010, AIS borrowed $15 million from KAMP, and KAMP received a senior secured interest in AIS's United States assets and control agreementsforAIS's United States bank accounts, giving KAMP the right to seize AIS's bank accounts. AIS borrowed another $5 million from KAMP in May 2012.
2Allen v. Dameron IVeta/., No. 93056-2 2013, AIS received a notice of default from KAMP, and KAMP seized control ofAIS's United States bank accounts. After it received the notice of default from KAMP, the AIS board tried to save AIS from its impending bankruptcy. At that time, there were five board members: Zechariah Clifton Dameron IV and Daniel Standen (the defendants in this action), as well as John Rigas, David McGrane, 3 and Steven Kalmanovitz (aka Steven Kalman). Unfortunately, the board was unsuccessful and AIS filed for bankruptcy on March 14, 2013. The intervening events were as follows. On February 15, 2013, the board wrote a letter asking KAMP to release the funds necessary forAIS to meet its payroll. Five days later, the board wrote to inform KAMP that should it fail to release the funds, AIS would have to terminate all of its employees. That letter informed KAMP that failure to release the funds would incur liability for withheld wages under chapter 49.52 RCW. KAMP responded, lifting its hold on AIS's bank accounts. As a result, the board now authorized every payment AIS made. However, the existing funds were insufficientto meetAIS's financial obligations, and the board requested additional funding4 from KAMP. Given the dire financial state of AIS, Dameron proposed that AIS make preparations to file for chapter 7 bankruptcy5 should KAMP decline to provide additional funding to AIS. Standen seconded Dameron's proposal, and the board approved the

3 McGrane was also the chief executive officer and president of AIS until he resigned on March 5, 2013. 4 The board also suggested selling AIS's subsidiaries. 5 See 11 U.S.C. §§ 701-784.


### 3Allen 

## v. Dameron IVeta/., No. 93056-2 proposal. Specifically, Dameron and Standen were "empowered" to file a chapter 7 bankruptcy petition afterapproval from the board ofdirectors. Immediatelyfollowing that meeting, Rigas resigned. KAMP rejected all of the board's funding requests. In light of KAMP's rejection, Dameron proposed thatAIS file for chapter 7 bankruptcy as soon as possible, terminate allAIS employees, exceptforthose necessaryto preparethe chapter7filings, and cease operations ofAIS and its subsidiaries. The board unanimously approved the proposal. McGrane resigned afterthat meeting, leavingAIS withouta chiefexecutive officer (CEO) and only Dameron, Standen, and Kalman as the remaining members ofthe board. Pursuant to the board's action, Allen sent a termination letter to AIS's employees
on March 4. The termination letter informed the employees of the chapter 7 filing and acknowledged that they would receive their final paycheck, including accrued vacation,
on March 15, their regular payday date. Allen's employment was not terminated at this time since he was one of the employees the board deemed necessary to prepare the chapter 7 filing. At the next board meeting, the board decided that upon filing for chapter 7 bankruptcy, the remaining company funds would be allocated for retained employees, payroll taxes, state sales taxes, and employees, while holding $25,000 for insurance. Shortlythereafter, the board paid $19,837.08forAIS'sApril general insurance premiums, $13,953.00 for directors' and officers' insurance, and $7,853.96 in payroll advance for retained employees.

4Allen 

### v. Dameron IVeta/., No. 93056-2 On March 14, 2013, the board authorized the filing ofAIS's chapter 7 bankruptcy petition. 6 Minutes prior to the filing, the board adopted a resolution to use its remaining assets for employees' wages. The board paid approximately $16,000.00 to employees' 401 K plans and $31,423.72 to payroll. That amountwas not sufficientto cover all wages thatAIS owed to its employees, which amounted to $322,615.02, and none ofthat money was paid to Allen. II. Procedural History AfterAIS filed chapter 7 bankruptcy, three former employees filed a class action suit on behalf of all terminated AIS employees against all former AIS board members, including Dameron and Standen (hereafter referred to as the defendants), for willful withholding of wages under RCW 49.52.050, the Washington Rebate Act (WRA). That
case settled, and the defendants and Rigas agreed to paythe class $356,500. However, the terms ofthe settlement offer excluded Allen as a member ofthat class. Thereafter, Allen filed this civil suit in the United States District Court for the Western District ofWashington, alleging that the defendants willfully withheld wages in violation of the WRAJ See Allen v. Dameron, No. C14-1263RSL, 2016 WL 827168, at *1 (W.O. Wash. Mar. 3, 2016) (court order), vacated on recons., 2016 WL 4772484

6Allen asserts that the bankruptcy filing terminated all employees, including Dameron, Standen, and Kalman. Dameron and Standen disagree, asserting that they resigned following the filing. However, Kalman is the only board member who appears to have formally resigned; in a letter dated March 13, 2013, Kalman announced his resignation, effective upon the chapter 7 filing. Regardless, Dameron and Standen's employment terminated upon the filing for chapter 7 bankruptcy. 7 Allen sought an award of $84,175.21, but the district court concluded that the unpaid wages, severance, and unused vacation amounted to $78,303.17.

5Allen

## v. Dameron IVeta/., No. 93056-2 (Apr. 22, 2016) (court order). Allen claimed that he was owed three months' severance pay, unused vacation pay, and wages earned during two pay periods: wages with a payday date one day after the bankruptcy petition was filed and one week's worth of wages with a payday date 15 days afterthe filing. 8 The defendants moved for summary judgment, and the district court granted that motion, reasoning that (1) the defendants did not have the authority to pay Allen's wages on the dates they became due and that (2) the defendants did not willfully withhold wages from Allen. See id. at *4. Allen timely filed a motion asking the district court to vacate its judgment and reconsider the defendants' motion for summaryjudgment. Allen argued that the district court should have certified the relevant questions of state law to this court. Over the defendants' opposition, the district court granted Allen's motion to vacate the summary judgment. The district court then certified two questions to this court: [(1 )] Is an officer, vice principal, or agent of an employer liable for a deprivation of wages under RCW 49.52.050 when his or her employment with the employer (and his or her ability to control the payment decision) was terminated before the wages became due and owing? [(2)] Does an officer, vice principal, or agent's participation in the decision to file the chapter 7 bankruptcy petition that effectivelyterminated his or her employment and ability to control payment decisions alter the analysis? If so, how? We granted review pursuant to RCW 2.60.020. 9

8 AIS filed its chapter 7 petition on March 14, 2013. The first set ofAllen's wages had a pay period that ended on March 10, with a payday date of March 15. The second set ofAllen's wages had a pay period that ended on March 24 and a payday date of March 29.
9 On appeal, on October 13, 2016, the defendants filed their answer brief to the Washington Employment Lawyers Association's amicus briefsupporting Allen. Allen moved to strike this answer, arguing that it was untimely because the deadline to file any answer to the amicus was September 29, 2016. Subsequently, the court allowed the defendantsto file a motion for an extension oftime to
6Allen 

## v. Dameron IVeta/., No. 93056-2 STANDARD OF REVIEW Wetreat certified questions as "questions of lawthatwe review de novo." Carlsen
v. Glob. Client Sols., LLC, 171 Wn.2d 486, 493, 256 P.3d 321 (2011 ). In addition, "[w]e consider the legal issues not in the abstract but based on the certified record provided by the federal court." 

### /d. Forcases such as this, where the questions "pertain to a motion for summary judgment, we perform the same inquiry as the district court." Saucedo 

## v. John HancockLife 

### & Health Ins. Co., 185 Wn.2d 171, 178, 369 P.3d 150 (2016). ANALYSIS We reject the defendants' invitation to reformulate the certified questions and
answer both certified questions in the affirmative. First, we hold that an officer, vice principal, or agent may be personally liable for the failure to pay wages underthe WRA,
even when the payday date for such wages comes after the filing of chapter 7 bankruptcy. Second, an officer, vice principal, or agent's participation in the decision to file for chapter7 bankruptcytends to showawillful withholding ofwages undertheWRA. 

### I. We Decline the Invitation To Reformulate the Certified Questions We have the authority to reformulate certified questions. Danny

## v. Laidlaw Transit Servs., Inc., 165 Wn.2d 200, 205, 193 P.3d 128 (2008). However, we decline to do so here. The defendants' requestto reformulatethe certified questions is actually a request forthe court to answera completely differentquestion. The defendants ask us to answer whetherthey, as members ofthe board of directors, may be held liable underthe WRA.

be applied to their answer retroactively. We passed these motions to the merits and now grant the defendants' motion for extension oftime and deny Allen's motion to strike.
7Allen 

## v. Dameron IVeta/., No. 93056-2 The certified questions, on the other hand, ask us to clarify our law regarding the application of the WRA in circumstances of chapter 7 bankruptcy. The district court's certified questions already assume the existence of individuals who are liable underthe WRA. The WRA states that an individual can be personally liable ifthey are an "officer, vice principal, or agent." 10 RCW 49.52.050. The district court's certified questions mirror that language exactly by asking aboutthe liability ofan "officer, vice principal, or agent." We decline to answer a question that the federal district court seems already to have answered. In addition, the circumstances where a member of the board of directors will be liable underthe WRA appear to be rare. Here, the directors were acting as the de facto officers ofAIS. In fact, AIS operated without a CEO for a period ofseveral days until the board filed for chapter 7 bankruptcy. The board made the decisions ofwho, when, and how much was being paid to AIS employees. Such decision-making is not within the normal duties of a member of the board of directors for a corporation. Given the rare circumstances in which a director would make the type of decisions subject to liability underthe WRA, we decline to reformulate the certified question. II. An Officer, Vice Principal, orAgent May Be Held Liable underthe WRAWhen His or Her Employment Was Terminated by the Filing of a Chapter 7 Bankruptcy Petition and the Payday Date forWages Came afterthe Filing We answer the first certified question in the affirmative for two reasons. Neither the date ofthe employee's payday in relation to the filing ofthe chapter 7 bankruptcy nor

10 The terms are defined according to their common law meanings. See Ellerman v. Centerpoint Prepress, Inc., 143 Wn.2d 514, 520-23, 22 P.3d 795 (2001). The additional requirement that the individual officer, vice principal, or agent had control over the payment of wages is discussed infra at Section II.


### 8Allen 

### v. Dameron IVeta/., No. 93056-2 the court's holding in Ellerman v. CenterpointPrepress, Inc., 143 Wn.2d 514, 522-23, 22 P.3d 795 (2001 ), precludes imposing personal liability underthe WRAon an officer, vice principal, or agent. 

### A In Circumstances of Chapter 7 Bankruptcy, We Look to Whether an Employee's Earned Wages Were Withheld on the Date the Corporation Filed for Bankruptcy As demonstrated in Morgan 

### v. Kingen, 166 Wn.2d 526, 210 P.3d 995 (2009), the filing of bankruptcy does not cut off the potential liability of an officer, vice principal, or agent. Morgan presented a similarfact pattern-wageswere earned priorto the chapter 7 filing, but were not payable until payday dates after the filing. 

### /d. at 532, 535 n.1. A CEO and CFO opened and operated a casino. 

### /d. at 531. One year after opening, the casino filed for chapter 11 bankruptcy. 

### /d. at 532. Afterthe chapter 11 filing, the CEO and CFO continued to operatethe casino as debtors-in-possession. 

### /d. The casino'sfinancial position continued to decline, and the United Statestrustee movedto convertthe chapter 11 proceeding into a chapter 7 liquidation. 

### /d. During the hearing on the motion, the officers declined to inject more capital into the casino and the matterwas converted into
achapter7 bankruptcy. 

### /d. Beforethe conversion, the casino's employees earned wages covering two pay periods, and the payday dates forthe wages occurred afterthe chapter 7 conversion date. 

### /d. at 532, 535 n.1. The officers therefore "suggest[ed] the failure to paythesewages was beyond theircontrol," relying on our holding in Ellerman. /d. at 535. We addressed this argument first in a footnote, stating that "thefirst pay period of unpaid wages ended well before the conversion date

... [and] even ifwe considered the payday date relevant, [the casino] lacked adequate cash to pay the employees their earned wageswhen it entered chapter7 liquidation." /d. at n.1. Thus, Morgan suggested



### 9Allen 

## v. Dameron IVeta!., No. 93056-2 that in circumstances of bankruptcy, we are most concerned with the withholding of earned wages on the date of filing, regardless ofwhether the established payday date
comes afterthe employer entered bankruptcy. This understanding is consistent with RCW 49.48.010, which states that "[w]hen any employee shall cease to workfor an employer, whether by discharge or by voluntary withdrawal, the wages due him or her on account of his or heremployment shall be paid to him or her at the end ofthe established pay period." Under normal circumstances, an employee is paid his or her wages earned during a specified pay period on a payday date established by the employer. WAC 296-126-023. In those circumstances, wejudge whether an employer or agent has withheld wages underthe WRA ifthe employerfailed to pay the employee his or herwages after the payday date ended. However, when an employer files for chapter 7 bankruptcy, the filing usually terminates all employees, as happened in this case. Often, this renders the previously established pay periods and payday dates irrelevant ifthey occur afterthe filing. 11

11 The defendants argue that we should not hold an officer, vice principal, or agent liable in this situation because the legislature has created an alternative remedy for employees like Allen. The defendants direct the court to RCW 49.56.010, which states that wage claims "are preferred claims [in cases of bankruptcy], and must be paid by such trustees or assignees before any other creditor or creditors." Therefore, the defendants argue, "the trustee is the proper party against whom such claims may and should be brought." This assertion ignores the purpose of the WRA, which expressly provides for personal recovery against individual officers. As we have noted in several cases, "The statute must be liberally construed to advance the Legislature's intent to protect employee wages and assure payment." Schilling v. Radio Holdings, Inc., 136Wn.2d 152, 159, 961 P.2d 371 (1998). In addition, "[t]he wage statutes
... reflect the legislature's strong policy in favor of payment of wages to employees." Jumamil

### v. Lakeside Casino, LLC, 179Wn. App. 665, 682, 319 P.3d 868 (2014). Although Allen may have another cause of action pursuant to RCW 49.56.010, this fact does not negate his cause of action underthe WRA. There are many reasons why an employee may choose to sue an individual officer instead of the trustee of the employer's bankruptcy proceedings, chief among them an organization's financial insolvency, e.g., insufficient funds to satisfy wage claims. In such
10Allen 

### v. Dameron IVeta/., No. 93056-2 We decline to allow responsible officers, principals, and agents to circumvent the legislature's intent that employees receive all the wages owed to them simply because the previously established payday date for wages occurs after a chapter 7 filing. 12 The purpose ofthe WRA is clear; it is "primarily a protective measure ... [with] the aim or purpose ...to see that the employee shall realize the full amount ofthe wages ... he is entitled to receive from his employer, and which the employer is obligated to pay, and, further, to see that the employee is not deprived of such right, nor the employer permitted to evade his obligation, by awithholding ofa part ofthe wages." Schilling v. Radio Holdings, Inc., 136 Wn.2d 152, 159, 961 P.2d 371 (1998) (quoting State v. Carter, 18Wn.2d 590,621, 140 P.2d 298, 142 P.2d 403 (1943)). In simplerterms, the WRA "must be liberally construed to advance the Legislature's intent to protect employee wages and assure payment." 13 

### /d. Therefore, in circumstances of chapter 7 bankruptcy, we look to whether the employer or officer, vice principal, or agent withheld

circumstances, the legislature has created a remedy via the WRA, allowing employees to recover theirwages from the individual officers, vice principals, or agents ofthe employer.

'12 The defendants also argue that the wages implicated by the certified questions are limited, comprising at most one month, implying that an employee's recovery of wages in these circumstances is somehow less important. See WAC 296-126-023(c) (requiring wages in Washington be paid at least monthly). However, this argument neglects that the WRA is part of "a comprehensive legislative system with respect to wages indicat[ing] a strong legislative intent to assure payment to employees ofwages they have earned." Schilling, 136 Wn.2d at 159. Underthe statute, it does not matter whether the wages withheld are for one day's or one month's work. In passing the WRA, the legislature intended to allow employees to recover a// the wages they have earned. See id. 13 The concurring opinion asserts that the mental element of the WRA is not subject to a liberal construction because it is not ambiguous and because it is a criminal statute. No party argues that the mental element of the WRA should be given a narrow construction. Instead, the defendants assertthatthey lackedthe necessary control overwages to be held liable as an officer, vice principal, or agent. As a result, we do not comment here on the proper construction ofthe mental element of the WRA. 11Allen v. Dameron IVeta/., No. 93056-2 their employees' earned wages "when [the company] entered chapter 7 liquidation" instead of on the established payday date. Morgan, 166Wn.2d at 535 n.1. B. Ellerman Exempted Low-Level Managers and Supervisorsfrom Liability underthe WRA Because They Lack Control overthe Decision To Pay Wages Ourdecision in Ellerman, on which the defendants rely, does notcut offthe liability of officers, vice principals, or agents upon the filing for bankruptcy. Instead, our discussion of control in Ellerman exempted low-level managers and supervisors from liability underthe WRA, as our decision in Morgan confirms. In Ellerman, we were asked whether a business manager had sufficient control
over the payment of wages to be held liable under the WRA. Ellerman, 143 Wn.2d at 519. Since the terms "vice principal" and "agent" are not defined in the WRA, they are given their common law meanings in which they could encompass a manager or supervisor. /d. at 521-22. However, in Ellerman, we declined to hold the business manager liable under the WRA. 

### /d. at 523. After explaining that the manager lacked control over the payment of wages and the legislature "intended to impose personal liability on only [individuals] who directly supervise or control the payment ofwages," we concluded the managerwas not liable underthe WRA. 

### /d. 521-22. In Morgan, we distinguished the Morgan officers from the Ellerman manager. Morgan, 166 Wn.2d at 536. In Morgan, it was clear that the officers "both had authority
overthe payment ofwages." 

### /d. We went on to note that "the wages owed were accrued prior to the chapter 7 conversion" 14 and that the "legislature intended

... to impose

14 The amicus brief ofWashington Employment Lawyers Association discusses at length the issue of when Allen's wages accrued, claiming that it is the only way that Morgan can be distinguished from the present case. The issue of wage accrual appears to be a heavily fact-dependent inquiry,
12

### Allen v. Dameron IVeta!., No. 93056-2 personal liability on the officers in cases likethis becausethe officers control thefinancial decisions of the corporation." 

### /d. Therefore, we rejected the officers' lack of control argument, declaring "bankruptcy ofthe corporation is not a means to escape personal liability by those who failed to pay wages owed." 

### !d. Acknowledging that this language in 

### Morgan supports Allen's position, the defendants attempt to distinguish it on the basis that in 

### Morgan we decided "whether financial status, specifically bankruptcy under chapter 7 liquidation, is a valid defense to negate the finding of a 

### willful failure to pay wages owed to employees." 

### /d. at 531 (emphasis added). The defendants argue that 

### Morgan's holding is limited to the second element undertheWRA, willfulness, since the courtframed the question as one dealing with the elementofwillfulness. Thedefendantstherefore assertthatthe court's language in 

### Morgan clarifying why the WRA requires an officer to have control over the payment ofwages is dicta and not binding. Rather, they argue that 

### Ellerman's holding precludes
a finding of personal liability since they lacked control over the payment ofwages after the chapter 7 bankruptcy filing took place. The defendants' argument attempts to isolate both the 

### Ellerman and 

### Morgan holdings and ignores the language oftheWRA. Before the court can reach the question ofwhetherthe withholding ofwages was willful underthe WRA, it mustfirst determine if
an individual qualifies as a member ofthe class of individuals designated as potentially liable under the statute. 

### See RCW 49.52.050 (requiring an individual to be an "officer,

and as the case is on a motion for summary judgment, the district court has yet to weigh in on these issues. In addition, this would be a superficial way for the court to distinguish Morgan, given its language that directly addresses the main issues contested here. As a result, the court need not and does not address the question aboutwhen Allen's wages accrued.


### 13Allen v. Dameron IVeta/., No. 93056-2 vice principal, or agent" and a willful withholding of wages to establish liability). The Morgan court concluded that the officers held the necessary control to qualify as officers under the WRA, despite the fact that the casino's status had been converted into a chapter 7 bankruptcy. See Morgan, 166 Wn.2d at 536. As a result, the court's language rejecting the officers' argument that "the failure to pay the[] wages was beyond their control" was not dicta, but a necessary first step in the court's analysis. 

### /d. at 535. Consequently, our analysis in Morgan controls. The defendants make the same argumentthe officers in Morgan made, namelythatthey lacked control overthe payment ofwages and therefore cannot be held liable underthe WRA. We once again reject the argument that the filing of chapter 7 bankruptcy precludes holding an officer, vice principal, or agent personally liable underthe WRA. Ill. An Officer, Vice Principal, or Agent's Participation in the Decision To File the Chapter 7 Bankruptcy Petition Tends To Show aWillful Withholding ofWages We also answer the second certified question in the affirmative. An officer's participation in the decision to file the chapter 7 bankruptcy petition, where this decision effectively terminated the officer's employment and thus the ability to control payment decisions, makes it more likelythat an officer may be held liable undertheWRAbecause it shows willfulness, the second element required by the WRA. To succeed in an action under the WRA, a claimant must show both (1) the individual being sued is an officer, vice principal, or agent ofthe claimant's employerwho has control over the payment of wages and (2) the individual willfully withheld the claimant's wages. See RCW 49.52.050; see also Ellerman, 143 Wn.2d at 523. We read the districtcourt's second question as one dealingwith the second elementoftheWRA

### 14Allen v. Dameron IVeta/., No. 93056-2 willfulness. We hold that an officer's participation in the decision to file the chapter 7 bankruptcy petition alters the WRAanalysis because it tends to showwillfulness on the part ofthe officer. In Schilling, we discussed the element ofwillfulness underthe WRA. We held that the "nonpayment of wages is willful 'when it is the result of a knowing and intentional action.'" Schilling, 136Wn.2d at 160 (quoting Lillig 

### v. Becton-Dickinson, 105Wn.2d 653, 659, 717 P.2d 1371 (1986)). We further explained that "there are two instances when an employer's failure to pay wages is not willful:

... 'either by a finding of carelessness or by the existence ofa bona fide dispute."' /d. (quoting Pope 

### v. Univ. ofWash., 121 Wn.2d 479,491 n.4, 852 P.2d 1055, 871 P.2d 590 (1993)). "[C]arelessness

... suggests errors in bookkeeping or other conduct of an accidental character," and a bona fide dispute exists when there is "a 'fairly debatable' dispute over whether an employment relationship exists, or whether all or a portion of the wages must be paid." 

### /d. at 161 (citing Brandt v. lmpero, 1Wn. App. 678, 680-81, 463 P.2d 197 (1969)). In Schilling, we specifically rejected a "financial inability to pay" exception to the WRA, concluding that
an officer's failure to pay was willful under the WRA in circumstances where the corporation lacked sufficientfunds to pay wages. 15 

### /d. at 164-66.

15 The concurring opinion argues thatthe court cannot reject a "'financial inability to pay"' defense to criminal liability under the WRA. Concurrence at 4. The WRA creates criminal liability and provides a civil remedy when an employer willfully withholds wages. This case is about the civil remedy available underthe WRA. The criminal aspect ofthe statute was not briefed by the parties and is not before us. 

### 15Allen v. Dameron IVeta/., No. 93056-2 We also discussed the element of willfulness under the WRA in Morgan.166 Wn.2d at 536-37. There, we reasoned that officers, vice principals, or agents should be held liable under the WRAfor theirwillful decisions that impact the payment ofwages: The legislature intended

... to impose personal liability on the officers in cases likethis becausethe officers control the financial decisions of the corporation. There are many examples that highlight the need for such risk of personal liability. The officers decide whether to pay one debt over another (e.g., wages). The officers have the choice to file bankruptcy or, say, close the business and pay its debts (including wages). The officers decidewhetherto continue running an inadequately capitalized corporation while hoping for a change in financial position. 

### /d. The WRA imposes personal liability on an officer for such decisions because "the officers control the choices over how the corporation's money is used." 

### /d. at 537. And all ofthese decisions constitute willful action taken underthe WRA. Contrary to the defendants' assertions, we do not subject any business decision to potential liability under the WRA. As discussed above, Morgan already held that individuals may be held liable underthe WRA in circumstances ofchapter 7 bankruptcy. The defendants offer no evidencethat Morgan resulted in a business environmentwhere management prematurely leaves corporations in financial distress. Rather, this decision is consistent with our reasoning in Schilling and Morgan. The defendants do not argue a recognized exception to the willfulness element of the WRA as discussed in Schilling. Instead, they say they lacked control. However, the defendants misapprehend when having control is critical in circumstances of bankruptcy. As discussed above, we are most concerned about whether the wages that employees have earned were withheld. A bankruptcy does not excuse the willfulness of an individual's exercise of his orher control to not pay wages, especially in circumstances where the decision to file for



### 16

### Allen 

## v. Dameron IVeta/., No. 93056-2 chapter 7 bankruptcy is controlled by the individual exercising control over wages. 

### See id. at 536 (concluding "bankruptcy ofthe corporation is not a means to escape personal liability by those who failed to pay wages owed"). Here, the defendants chose to retainAllen, chosewhen to file for bankruptcy, and, most importantly, choseto withhold hiswages. Unlikethe business manager in 

### Ellerman, the defendants had full control overthe decision to pay wages up until they chose to file forchapter7 bankruptcy. Then, the defendants choseto putfurther paymentofemployee wages beyond their control by filing a chapter 7 bankruptcy petition. In addition, the defendants choseto pay insurance costswith companyfunds beforethey paid employee wages in full. The defendants' decision to put the payment of employee wages beyond their control by filing a chapter 7 petition tends to showtheirwillful withholding of wages under the WRA. As a result, individuals like the defendants may be held liable for their decision not to pay wages accordingly. CONCLUSION We reject the defendants' invitation to reformulate the certified questions. We
answer both certified questions in the affirmative. First, we hold that an officer, vice principal, or agent may be held liable underthe WRAwhen his or her employment was terminated due to chapter 7 bankruptcy and the payday date forwages owed came after the filing for chapter 7 bankruptcy. This conclusion reflects our holdings in both 

### Ellerman and 

### Morgan. And, in these circumstances, we considerwhetherthe earned wages were withheld on the date when the individuals chose to file for chapter 7 bankruptcy, rather than on the established payday date ifsuch a date came afterthe chapter 7 filing.

17

### Allen 

## v. Dameron IVeta!., No. 93056-2 

### Second, we hold that an officer, vice principal, or agent's participation in the decision to file the chapter 7 bankruptcy petition tends to show a willful withholding of wages under the WRA. We recognize that the legislature intended to hold individuals liable in these circumstances because of the control they exercise over payment decisions. Having answered the certified questions in the affirmative, we remand the
case to the district court for proceedings consistent with this opinion.



### 18

### Allen v. Dameron IVeta/., No. 93056-2

WE CONCUR.

# t~·~·-

19

### Allen v. DameronIVetal., No. 93056-2 

### (Gordon McCloud, J., 

### concurring)

No. 93056-2 GORDON McCLOUD, J. 

### (concurring)-! agree with the majority's answer to the certified questions, but I write separately to emphasize the limits ofthose holdings. The first certified question asks whether "an officer, vice principal, or agent ofan employer [is] liable for a deprivation ofwages under RCW 49.52.050 when his or her employment with the employer (and his or her ability to control the paymentdecision) wasterminatedbeforethe wages became due and owing." Order Vacating J. & 

### Certifying Questions to Wash. Supreme Ct. (Order), 

### Allen v. Dameron, No. C14-1263RSL, at 3-4 (W.D. Wash. Apr. 28, 2016). The majority saysthatthe answerisyesbecause (1)thoseentities are listedaspotentialdefendants in the cited statute and (2) termination ofthose entities' employment prior to their paydaydoesnotinsulatethemfrom liability. Majorityat 8-11. It

### concludes thatthis

meansthatsuchentities 

### "maybeheldpersonallyliableundertheWRA [(wagerebate act), RCW49.52.050]." 

### Id. at 2 (emphasis added). I agree. Iwrite separatelyto clarifythat "may"means "may." Theotherprerequisites to WRA liability must still be met before such liability can attach. Specifically, 1

### Allenv. DameronIVetal., No. 93056-2 (GordonMcCloud, J., concurring)



### plaintiffsmuststillprovethe statute'smental element: thatthe deprivationofwages
was done "[w]illfully and with intentto deprive." RCW49.52.050(2). Themajority is generally correctthattheWRAmustbe liberally construedto advance the legislativepurpose '"toprotectemployee wages and assurepayment."' Majority at 11 (quotingSchillingv. RadioHoldings, Inc., 

### 136 Wn.2d 152, 159, 961 P.2d 371 (1998)). Butthis mental element ofthe statute we are construingtodayRCW49.52.050(2)-isnot subjectto aliberal constructionfor two reasons. First, RCW 49.52.050(2) is not ambiguous. The legislature clearly and expressly includedwithinthat statute the mental element of"[w]illful[ness] and
... intent to deprive." RCW 49.52.050(2). When a statute contains such an explicit
mens rearequirement, the courts must enforce it. Second, RCW 49.52.050(2) is a criminal statute. It 

### states that any covered person who commits any act listed in subsections (1)-(5) "[s]hall be guilty of a misdemeanor." RCW49.52.050. Thus, evenifitwere ambiguous, itwould subject to a strict, not aliberal, construction. 1

1 The fact that the plaintiffs in this case seek a civil remedy does not change that. RCW 49.52.070 provides a civil remedy to employees who are victimized by the willful and intentional deprivation ofwages criminalizedbyRCW49.52.050(2). Butit is still the meaning ofRCW49.52.050(2) thatwewere asked to interpret. Andbecausethat statutehas criminal applications,wemustapplythe sameinterpretiverulestothemensrea inthat statutethatweapplywheninterpreting othercriminal statutes. 

### See UnitedStates v. 2

### Allenv. DameronIVetal., 

### No. 93056-2 (GordonMcCloud, J., 

### concurring)

Itherefore agree withthe majority's answer thatthe entities listed inthe first question, which are the same as the entities listed as potential defendants in RCW 49.52.050, "may" be held liable. Butthe plaintiffs in this case must still prove the other prerequisites to WRA liability, including willfulness and intent, in order to prevail. The secondcertifiedquestion asks whethera defendant's "participationinthe decision to file the Chapter 7 bankruptcy petition that effectively terminated his or her employment and ability to control payment decisions alter[s] the analysis" and, "[i]f so, how." Order at 3-4. Once again, the majority correctly answers in the affirmativeandexplainsthat, inthecontextoftherecordwehavebeensuppliedwith inthis case, "anofficer'sparticipationinthedecisionto filethechapter7bankruptcy petition altersthe WRA analysis because ittends to showwillfulness onthepart of the officer." Majority at 15. The majority does, however, go onto statethatwehave "specificallyrejected

a 'financial inability to pay' exception to the WRA." 

### Id. (quoting 

### Schilling, 136

Thompson/CenterArms Co., 

### 504 U.S. 505, 518 n.10, 112 S. Ct. 2101, 119 L. 

### Ed. 2d 308 (1992) (plurality opinion) (rules ofstatutory construction applicable to criminal statutehere, rule oflenity-appliesto atax statute with both civil and criminal applications); id. at 519 (Scalia, J., 

### concurring in judgment) (expressly agreeing with the plurality's application ofthatinterpretive rule). 3

### Allen v. DameronIVetal., No. 93056-2 (GordonMcCloud, J., concurring)



### Wn.2d at 164-66); 

### see also id. at 16 (quoting 

### Morgan v. Kingen, 166 Wn.2d 526, 536-37, 210 P.3d 995 (2009)). Once again, I write to emphasize my understanding that this is a holding limited to the particular facts presented here. Indeed, the majority could not completely reject a "financial inability to pay" defense to criminal liability without contradicting controlling United States Supreme Court precedent. 

### Bearden v. Georgia, 461 U.S. 660, 672-73, 103 S. Ct. 2064,76 L. 

### Ed. 2d 221 (1983) (revoking probation for nonwillful failure to pay fine "would be contrary to the fundamental fairness required by the Fourteenth Amendment [to the federal constitution]"). Thus, despite some broad statements in the majority (and in the 

### Schilling and

### Morgan decisions on which it relies) about financial inability to pay beingirrelevantto criminal consequences, Itakethe majority's actualholding as far
more narrow. It

### is aholding abouttiming: [D]efendants
... say they lacked control. However, the defendants misapprehend when having control is critical in circumstances of bankruptcy
.... A bankruptcy does not excuse the willfulness ofan individual's exercise ofhis or her control to notpay wages, especially in circumstances where the decision to file for chapter 7bankruptcy is controlledby the individual exercising control overwages. Majority at 16-17.

4

### Allenv. DameronIVetal., No. 93056-2 (GordonMcCloud, J., concurring)



### To the extent the majority opines thatthe defendants' decisions to file a chapter 7 bankruptcypetition supports an inference ofwillfulness, I read that as a holding based on the facts ofthis case. Specifically, as the majority explains, "the defendants chose to retain Allen, chose when to file for bankruptcy, and, most importantly, choseto withholdhis wages." 

### Id. at 17. [T]he defendants had full control over the decision to pay wages up until they choseto file for chapter7bankruptcy. Then, the defendants chose to put further payment ofemployee wages beyondtheir control by filing a chapter 7 bankruptcy petition. In addition, the defendants chose to pay insurance costs with company funds before they paid employeewages in full. 

### Id. Giventhese specificfacts, Icompletelyagreewiththemajority'sconclusionthat "defendants' decision to put the payment ofemployee wages beyond their control byfiling achapter7petitiontendsto showtheirwillful withholdingofwagesunder theWRA." 

### I d. Withthese observations aboutthelimits ofthemajority'sholding, I concur.

5

### Allenv. DameronIVetal., No. 93056-2 (GordonMcCloud, J., concurring)



### 6